Tornado Alley (PROG)

[StephanieVanbryce]

I picked this up ..written when Greenspan was fed chief ...maybe these are the same rules .. ..

What is the Federal Reserve and what does it do?

Periodically, I hear about the Federal Reserve raising interest rates or lowering interest rates. But what is the Federal Reserve? Is it a governmental body or a private one? Does it just set interest rates or does do other things?

The Federal Reserve is considered an independent central bank. It is independent since its decisions do not have to be ratified by the President or Congress. The Federal Reserve System was created by Congress in 1913 "to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes."

While the Federal Reserve is an independent institution, it is still accountable to Congress. The Constitution gives Congress the power to coin money and set its value. Congress delegated this power to the Federal Reserve in the 1913 Federal Reserve Act, but still maintains oversight authority. Under the Humphrey-Hawkins Act of 1978, the Federal Reserve must submit a report on the economy to Congress by February 20 and July 20 of each year. Alan Greenspan, the current Chairman of the Federal Reserve Board of Governors, is called to testify on the report before Senate and House Committees.

The Federal Reserve System is made up of a Board of Governors and twelve regional Federal Reserve Banks located in major cities throughout the country. There are seven members that sit on the Board of Governors. Each member must be nominated by the President of the United States and confirmed by the Senate. Members are appointed to serve 14-year nonrenewable terms. The President also nominates members of the Board to serve as Chair and Vice Chair for four-year renewable terms. These appointments must also be confirmed by the Senate.

The most important policy making body of the Federal Reserve System is the Federal Open Market Committee (FOMC). It is composed of the seven Governors, the president of the Federal Reserve Bank of New York, and four other Reserve Bank presidents that serve on a rotating basis. The FOMC can effect monetary policy through the use of three tools:

1. Open market operations--the buying and selling of U.S. government securities.

2. Altering reserve requirements--the amount of funds that commercial banks must hold in reserve against deposits.

3. Adjusting the discount rate--the interest rate charged to commercial banks.

Contributing Author: Prof. Shad Satterthwaite, The University of Oklahoma
Other Resources

Board of Governors of the Federal Reserve Board Official Site

The Federal Open Market Committee

The Beige Book

"Federal Reserve Policy, Inflation, & Inflation Targeting"
[ http://www.house.gov/jec/fed.htm ]


http://thisnation.com/question/033.html


..sounds to me like congress can tell them what to do Or at the minimum give reports to congress ... maybe F6 knows ...